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Investing in Utilities: What if the lights go out?

Posted April 17, 2008

“If a Democrat somehow steals his (or her, of course) way into the Oval Office, alternative energy is going to be a fantastic investment. ” - Andrew Snyder

By Andrew Snyder

Baltimore (TFN)– You should be glad you do not live in Juneau, Alaska.  And if by a 1 in a 100,000 chance you do live in Juneau, turn off your computer.  You are wasting precious electricity.

While it is not making any mainstream headlines today, Alaska’s capital is in a state of emergency.  A series of major avalanches has taken out the lines that connect Juneau to the hydroelectric source that creates its power. 

With nearly two miles of lines down, and no safe access routes for up to a month, the city is in big trouble.  It has been forced to switch to huge diesel backup generators.  They will be running full power for at least three months until the lines are repaired. 

The freak incident will cause huge amounts of financial hardship in the area.  As you can probably figure, diesel generators are a bit more expensive to operate than a dam.  Juneau’s generators are burning about 100,000 gallons of diesel a day.  And with diesel already going for a premium (remember there are no roads into the town to deliver fuel), the city’s fuel bill from this incident will be over $400,000 per day. 

You want how much?!

Thanks to the rare ability for the city’s power provider to almost immediately raise its rates, Juneau’s citizens will be forced to pay about four times the normal amount when their next bill arrives.  Prices are expected to soar from eleven cents per kilowatt to fifty cents or more.  The fallout will not be pretty for this tiny town.

I know what you are thinking, “Boy, that stinks for them.  Good thing it can never happen where I live.” 

You are probably right.  For those of us who live “on the grid,” a major, long-term blackout is highly unlikely, but this is another great reminder of how energy dependent this nation is.  We are hooked on the stuff and no form of intervention is going to get this monkey of our back.

The only thing left to do is invest in the stuff and at least profit from the dangerous addiction.  For decades, smart investors have been turning towards the nation’s utilities when the economy gets shaky.  They make good, safe investments that often pay a hefty dividend. 

Even though some may say we have reached the bottom of this economic downturn, I think the worst is yet to come.  That means, as Jim Cramer loves to yell… buy, buy, buy.

Keep the juices flowing

Electric utilities are a great option right now.  The market is finally being opened to competition, legislatures are allowing power producers to raise their rates, and the nation continues to expand its energy consumption. 

Some of the best utilities to look at are the ones working in non-regulated markets, or the ones smart enough to working with wind, solar, or other forms of alternative energy.  If a Democrat somehow steals his (or her, of course) way into the Oval Office, alternative energy is going to be a fantastic investment. 

One company worth taking a look at is Exelon Corp. (EXC:NYSE).  Its share price has nearly quadrupled in the past five years, and it pays 2.4% dividend. 

There are dozens of similar mega-producers out there just like one.  Start your research with the company that sells you your electricity and work out from there.  Almost all of them are a wise investment, especially if the economy weakens any further.

The cost of nearly everything is on the rise in this country.  Investing in the nation’s utilities is a great way to get some of that money working for you again. 

 

 


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Posted by Andrew Snyder · Filed Under Oil and Energy 

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